Home Health & Hospice Week

Finance:

Intrepid Tries To Shake Financier With Bankruptcy Filing

Bankruptcy litigation has turned ugly as a 196-office HHA chain dukes it out with financier DVI for control of  the company.

You might want to give a second thought to receivables financing, if you haven't already been following the meltdown of National Century Financial Enterprises and the bankruptcy last year of DVI Inc. DVI, operating under Chapter 11 bankruptcy, is engaged in an epic struggle with Intrepid USA and its CEO Todd Garamella for control of the privately held Edina, MN-based home health agency chain that includes 196 offices. But it looks like DVI has lost the first round in the litigation. Intrepid filed for reorganization bankruptcy in federal Minnesota bankruptcy court Jan. 29 and DVI filed a motion for the case to be dismissed Feb. 2, which would keep Intrepid out of bankruptcy. DVI also sought to have its dismissal motion considered in an expedited hearing. But Judge Nancy C. Dreher set an evidentiary hearing on the dismissal motion for March 31, says Intrepid spokesperson Jon Austin. That shows "DVI already lost out on its first request," for the expedited hearing, notes attorney E. Michael Flanagan with Weil, Gotshal & Manges in Washington, DC. That might give an indication of which way the court is leaning, Flanagan observes. The suit is already littered with nasty allegations on both sides, notes attorney Elizabeth Zink-Pearson with Covington, KY-based Pearson & Bernard. That's likely to mean a long, drawn-out legal process to sort out the issues, Flanagan predicts.

DVI Bankruptcy Keeps Intrepid Strapped In its bankruptcy filings (No. 4-40416), Intrepid charges that DVI defaulted on its financing agreement when it began to have widely reported financial trouble in the summer of 2003 (see Eli's HCW, Vol. XII, No. 25). The financing shortfall was especially critical when Intrepid purchased 102-office chain MedShares Inc. out of bankruptcy last July. After pledging $22 million for the purchase, DVI failed to come through with $11 million of it, Intrepid charges. "But for some last minute amendments worked out with [the Centers for Medicare & Medicaid Services]," Intrepid would have lost its $17 million investment in the MedShares acquisition so far, the company contends. DVI failed to come through on some of its daily financing as well, Intrepid alleges. Due to the financing shortfalls, Intrepid has been managing its operations on a cash receipt basis for the last six months, it says. When Intrepid sought alternate financing, potential lenders said they wouldn't commit until the DVI obligation was resolved, Intrepid spokesperson Austin says. After unsuccessful mediation, Intrepid filed bankruptcy, the court filings say. "In shorthand, Intrepid was trying to get rid of DVI," Austin tells Eli.

DVI Attempts a Coup But right before the bankruptcy filing, DVI declared Intrepid and [...]
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